Can you find flip opportunities in MLS listings?

Question

I am using different tactics on sites that show MLS listings to find flip opportunities.

I got the idea after watching Jerry Norton and others on YT who find many of their deals "on market" by conducting online research on sites such as Zillow, Redfin etc.

I am pretty experienced with excels and numbers and can cover a whole city in a few hours and find the best opportunities.

I don't have a physical presence (I live in Israel), so I can't validate my rehab estimates by actually looking at the property.

Here's my methodology:

Finding properties whose $/sqf is significantly below the average of that neighborhood.Checking renovated comps.

Estimating the rehab cost by looking at the pictures (this is what you will need to validate).

I look for other indicators such as time on the market, usually >60 days, and for consecutive price reductions.

I calculate for what target purchase cost + rehab we can get 70% of ARV.

If the target cost is anywhere near the asking price, the lead is valid and can be sent for further evaluation with somebody in the area.

I have limited experience with a partner in Dallas who showed interest but I still didn't get a confirmation from him if he is actually going to close any of my leads.

I would love to know if you think there are "on market" opportunities and this method can actually find them?

If you have other methods for finding flip opportunities please share with us!

Thanks for any advice!

Eric M. · Answer

I don't want to discourage you at all, you can find deals on the MLS. It is a myth that you can't. It is also a myth that they are all over the place and easy to find.

But your methodology is precisely what hundreds and thousands of other flippers do every day scouring the MLS. There is nothing new about it. This is why it is tough to find real deals there. Everyone is looking at the exact same stuff. My software sends me long lists of "deals" every day that fit certain automated criteria to be "under value". After looking at them all, if I find 1 that is actually close to a possible deal, I am lucky. If I find one that is actually a deal at list price, it is guaranteed others have found it and we are now in a multiple offer situation and the ultimate buyer is going to pay much more. Some people like those competitive bidding situations, I personally don't.

I can find you hundreds of properties that are significantly below neighborhood value. All but a very small handful are below neighborhood value for good reasons that are often unfixable. They are very old, on a busy street, have no basement, no garage, high crime area, or property taxes are double what they should be, etc etc etc. These properties will ALWAYS be below average neighborhood value because the deficiencies are not easily fixed.

Then there are the others that have numbers that appear to be below value because the listings lie about square footage, or they are short sales and the listed price is a low ball that is made up in the realtor's head and not what you can actually pay.Doesn't mean you can't make money on any of these. Depends how far below value you can buy them.

And then there is the most dangerous ones of all...the ones I am finding a lot of lately. These are the "deals" you find in a falling market. The bloom is just coming off the rose in much of the country and just in the past few months DOM and inventory have shot up in previously hot ARV price points, and price cuts are frequent. So looking at 6 month old comps, everything on the market now looks under value. I see prices that just months ago would have been a screaming buy, I call a few realtor contacts who know the area better and inevitably hear that the market at that price point has died in recent weeks.

They still might be under value and they might ultimately be great buys if things swing the other way in a few months. Or you can be trying to catch the proverbial falling knife. You buy something and spend 6 months rehabbing only to find values have dropped and you can't sell it.  The beginning of a decline is the most dangerous because you just don't know yet. If you know it is going to decline you can plan for it and still make money. If you don't know, it is dangerous. We are at that dangerous time in many areas.

I am just saying that just looking at average numbers and not knowing an area will send you on a lot of wild goose chases. Appearing to be a deal and being a deal are very different.

And then finding a contractor who will go out and quote dozens of properties for free is not going to happen. They very very quickly tire of quotes without a job.

Yes, you read about the automated systems that hedge funds or large companies are using to supposedly identify property and quote rehab and make offers. They exist. Very very often those deals fall through and much more importantly, they have very deep pockets and very low cost of capital, so they can absorb the losers. They know that using automated systems will mean 10-20% of their purchases are going to be losers. They build that in to their model. Can you absorb these losers the same way? This is why those systems only work at scale and not for small guys.

It is and always has been and always will be...a numbers game. If you find the right numbers you are golden. Good luck.

Will Barnard · Answer

As I stated prior, you need to learn yourself how to properly and accurately estimate rehab numbers. This takes lots of practice and there are literally hundreds of threads right here on BP on exactly how to evaluate rehab numbers, I have posted details numerous times in numerous threads. Once you have this down, then you don’t have the chicken and egg situation. This is where you need to get in order to be successful at this.

Shay Nir · Answer

Thanks @Bryan Scibilia, Account Closed!"I just went under contract on an MLS deal I'm planning to BRRR and would be more than happy to discuss my numbers, how I got there, and my planned ROI." - I would love to hear more on this deal Bryan.[Solicitation Removed by Moderators]

Account Closed · Answer

@Will Barnard Well put, do you do any out of state investing? Right now the main way to get full scope of work is having someone go out and send videos of a list of items I send to them before sending to contractors. However, I feel there might be better systems out there to get a solid scope of work out of state. I've tried cross referencing contractors as well but you're correct, you do get a few different opinions

Account Closed · Answer

Do contractors usually charge a fee to visit the house and give a rehab quote? Most don't just to take a look at the home :)

How do you avoid the conflict of interest when sending a contractor who may underestimate for example to make you think the deal is better and hire him while in reality, the rehab would come up much higher? Absolutely, that is definitely why I would suggest having a couple go out and give you a bid. If everyones bid is identical besides one person then you know whos lying. Does the method I outlined above makes sense to you? Absolutely

Account Closed · Answer

Hi Shay! I actually do all of my deals out of state as well. I definitely would suggest finding someone on the ground that is looking at the home for you.

First thing you need is an agent - To help write of offers

Second I would get a really good contractor who can go out within 24-48 hour notice once you're under contract and give you a good bid. Run that by a few other contractors just in case.

Definitely reach out to an agent and they will send you on market deals and suggestions. You can always use sites such as Redfin or Zillow and they will have the data on there as well. Plenty of opportunity for on market deals!

Will Barnard · Answer

That’s a tough one Mel. I am not currently but my start into real estate was out of state investing in TX when I reside in CA. I built a team to buy and hold but in the end, got taken advantage of as I did not have boots on the ground to start and even after I did fly out there multiple times, I still got taken by team members. Perhaps that was a factor of my inexperience at the time or just unlucky that I ran into some dishonest people but those are the risks. If I did it over again, I would have gone down a different path. I am a strong believer that you can’t trust anyone more than yourself when it comes to money and out of state investing is full of dangers. I certainly would not trust the word of a few contractors and rely on that to determine my construction costs or evaluation of the numbers of any deal.

In this circumstance, I would spend the time and money going on location. There is no substitute for your own eyes on a deal. Another option is finding a reputable operator in the area of your choice and partnering with him or her.

Will Barnard · Answer

I think you are missing the point. As an investor, you need to learn how to properly evaluate rehab expenses on your own without needing multiple contractors coming out to give you a bid for every project you look at. Yes, any contractor worth their salt will charge someone for a bid on a project that they likely have little to no chance of getting the work on since it is not under contract yet with the buyer/client. I certainly wouldn’t waste my time doing that as I would be out of business real quick wasting all that valuable time. Additionally, how does the contractor know what to fix and what not to fix without a detailed scope of work? They won’t unless that is supplied to them by the client and if the client doesn’t know how to do that either, then they should not be wasting the time of the contractor.

Investors need to understand the numbers to come up with an accurate and financially sound offer amount. You can’t expect to rely on contractor bids to do that.

Bryan Scibilia · Answer

@Shay Nir

You sure can find opportunities sitting on the MLS. It’s not everyday nor is it easy, but most things worthwhile are neither.

Most of my BRRRR deals have been through the MLS but takes some serious negotiating and knowledge of the area.

At minimum, I would want someone I trusted walking the property, and would not feel comfortable doing a rehab estimate from pictures online.

I always walk the property once with my agent, and once with my main contractor before I make an offer. All of my offers are accompanied by a market analysis and why I am offering what I am, what I plan on doing to the property (at least what I’m planning on spending for the rehab) to justify my offer. So far no one has been offended because I give reasons behind my numbers.

Remember, the answer is always no until you ask.

I just went under contract on an MLS deal I’m planning to BRRR and would be more than happy to discuss my numbers, how I got there, and my planned ROI. If you ever need a boots on the ground investor in CT let me know, always happy to analyze a deal and provide feedback.

All the best,

Bryan

Will Barnard · Answer

Yes you can get deals from the MLS but it takes a lot of work, a lot of networking with agents and casting a wide net (or even multiple nets). Keep in mind that deals are often negotiated and created and not simply “found” on the MLS.

As to your last question, if you don’t have the house under contract, then as a contractor, I am certainly not wasting my time coming to bid a job that you likely may not be getting, so I would need to be paid for the bid and would certainly apply that bid payment to the job if you did land it and give me the work. Just as your time is valuable, so is the time of others and I see many investors here talk about sending a contractor out to each house they are interested in to get an idea of the costs, that is bad advice in my opinion as it is not respectful of the time of the contractor. Further more, you don’t work for free, right? So don’t expect anyone else who brings value to work for free either. Learn how to properly evaluate the costs of a rehab so you can get to an offer price that makes sense to cover you rehab, then once under contract, get your hard bids from contractors.

Can you find flip opportunities in MLS listings?

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